ESG news: Hulk & the incredible green bond market

27 August 2020

Dr Arthur KrebbersHead of Sustainable Finance, Corporates

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Cause stress in the capital markets as the COVID19 pandemic has done, and you – apparently – create a rejuvenated green bond market.

Make Dr Bruce Banner angry, and you evoke the Hulk, the all-powerful green superhero. Cause stress in the capital markets as the COVID19 pandemic has done, and you – apparently – create a rejuvenated green bond market.

In the second quarter of this year, the average Euro corporate green bond attracted a staggering 47% more demand than a “regular” bond1, compared to a 17% stronger demand in the first quarter of the year. What’s more, this additional bid has seemed quite price-insensitive. Primary green debt has also printed at a typical eight basis points tighter new-issue-concession than its plain vanilla counterpart.

Nevertheless, certain sceptics expect this appetite for green to dwindle: “Once a real economic crisis hits…,” they argue, “the focus on environmental and ESG2 matters will disappear.”

However, the opposite seems to be true: a global Ipsos poll found that around two thirds of the general public want governments to prioritise a green recovery post the pandemic3. Green bonds are an important part of the answer, as discussed in my last article. While there are many positive triggers for investing in green bonds, sometimes the negative drivers – avoiding climate change disaster – can be more poignant in a time of calamity.

It’s hard to see this “green bias” melting away: SRI4 investors and funds have performed relatively well in recent months (see: “Fighting coronavirus with your wallet”), and they’re expected to benefit from the financial firepower of monetary and fiscal authorities, with many of those likely to follow the EU’s lead in incorporating environmental considerations into their stimulus packages5.

Will we be seeing a team of green superheroes in the making?

1.

2. ESG : Environmental, Social & Governance

3. https://www.ipsos.com/sites/default/files/ct/news/documents/2020-04/earth-day-2020-ipsos.pdf

4. SRI : Socially responsible investment

5. https://www.euractiv.com/section/energy-environment/news/do-no-harm-eu-recovery-fund-has-green-strings-attached/

ESG/Sustainability
Green bonds


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